Bonds continue slide, could yen collapse more?

Trading in S&P 500 stocks was 12% below the 30-day average at this time of day. The U.S. bond market is closed because of the Veterans Day holiday. Of the 447 S&P 500 companies that have released third-quarter profits so far, 75% have beaten analysts’ forecasts. Wal-Mart Stores Inc., Macy’s Inc. and Nordstrom Inc. are among retail companies reporting earnings this week, while Home Depot Inc. posts results on Nov. 19.

Equities: The market is higher on this light day of trading. The DEC13 E-mini S&P 500 (CME:ESZ13) is up 1 point to 1767. We have the key line in the sand for this contract at 1764, and a potential next upside target according to the market profile of 1792.We could see the market approaching this 1792 level before the end of the year, especially if corporate earnings generally stay strong coupled with positive economic readings from government reports. We watch the 1764 level as a key line in the sand.

Bonds: The bond market continues to trade lower in the wake of the 200K+ jobs reading last Friday. The DEC13 U.S. 30-year bond futures (CBOT:ZBZ13) are down 9 ticks to 131’15. We would not at all be surprised to see the bonds approach 2013 lows by the end of this year. We believe the overall trend in the bond market is down, ever since the taper talk really initiated within the past 12 months. We have mentioned this before, but when we look at a monthly chart of the 30-year bond market, we do see a potential bearish “head and shoulders” pattern which could take the bonds down to 118 in the future.

Currencies: Interestingly, the DEC13 U.S. Dollar Index (NYBOT:DXZ13) is down this morning, trading down 22 ticks to 81.16. The DEC13 Euro is up 55 ticks to 134.11, with the DEC13 Aussie and Kiwi both down today. It is an interesting, somewhat unorthodox day in currency markets. We focus on the yen. The DEC13 Yen/USD futures are down 7 ticks to 100.80. We believe that, in light of unexciting wages growth in Japan, the yen could fall much further relative to the USD. We believe the yen could fall to the lows of this year, at around 96.50. We have our next target below there at 92. This could potentially occur if stimulus gets increased in Japan to try to stoke higher wage growth to Japan’s workers.

Commodities: DEC13 corn (CBOT:CZ13) and DEC13 coffee (NYBOT:KCZ13) have rebounded recently from their multi-week slides. Corn is up $.08 to $4.35, after hitting a key level of $4.16. DEC13 coffee is up $.0065 to $1.047. We have key support in the corn market at $4.29 and our next target higher is $4.43. DEC13 gold (COMEX:GCZ13) is down $3 to $1,281. We believe gold is headed lower overall, especially if we continue to see upbeat economic reports from the US. We would not be surprised to see gold approach $1,250, and possible 2013 lows at around $1,180. However, with other countries around the world still implementing rate-lowering and stimulative policies, we believe gold also may head lower but find a floor of around $1,100, at the lowest.

About the Author

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.